Is it profitable to open a restaurant in a developing country?

Is it really a good idea to open restaurants in developing countries?

In this article I want to give some advice to people who want to open a restaurant in any developing country, whether because they live there or because they want to invest from another country.

People who know me know that I have restaurants in several countries. I have them in lower-middle-income countries such as El Salvador and Colombia, in upper-middle-income countries such as Costa Rica, and in high-income countries such as the United States.

I want to start by answering a question that is quite common among visitors to the site and among some of my not-so-close friends…

Why do I still have restaurants in Latin American countries?

I am Latin American and I have lived 70% of my life, redundant as it sounds, in different countries of the region, and I have spent the last few years in the United States for a simple reason: I came here to invest and to enjoy the fruits of my work safely.

I have lived in the United States for a few years now. I left the direct, on-site management of my businesses in the hands of trusted people, and to this day I have not closed any of the restaurants I left running in Latin America. Why?

– First, because they are the source of income for many people, some of whom have been there since the beginning and believed in me even when I had to close my “first attempt” at a restaurant for lack of experience.

– Second, they are profitable businesses.

If, when I was working every day from early morning until late at night or the early hours of the morning, I did not take the money and close them or sell them, why would I close them now that they generate money without me working in the day-to-day of the restaurants?

Opening restaurants in El Salvador, Colombia, or Costa Rica is quite profitable and highly recommended.

And not only in these countries; it is also true in Guatemala, Honduras, Mexico, Ecuador, Panama, Argentina, Nicaragua, Bolivia, Chile, Paraguay, Peru, the Dominican Republic, Uruguay, etc. Let’s not forget Spain (which, although it has certain problems with its economy right now, is not a developing country and will undoubtedly overcome its current setbacks). My friends Antonio Maldonado and Julieta Ruiz are direct witnesses to how profitable some of these countries are, not to mention Giancarlo Molina, who is in almost all of them with his franchises.

Of course you will always see cases of restaurants that close, that have problems, with low foot traffic, etc. (like the 3 examples we analyzed from Mexico, Argentina, and Spain in the article: Restaurant closures, a time to reflect). That is normal in any sector; businesses close all the time, and that does not necessarily mean it is not profitable to start a restaurant. Of course it is, but to achieve it you will have to work hard. If you are willing to do that, you can be sure you will get excellent results.

Now, I want to explain the topic better by answering the following from my experience:

Why is it profitable to open restaurants in developing countries?

– Consumer habits are one of the keys. People in our countries, even with 1,000 problems, do not stop having fun and going out to eat. Naturally, in times of crisis that does not happen, but in most cases people really enjoy going out and socializing with family or friends.

– Costs are relatively low. It is much cheaper to open and operate a restaurant in any of these countries compared with other economies such as the United States.

– Because these countries are smaller economically speaking, they tend to offer facilities when it comes to advertising your restaurant. In other words, the advertising investment is lower.

– Online advertising (which is a priority today for any restaurant that wants to grow) is also much cheaper in these countries.

For example: in the United States I have to invest about $1,000 US dollars to attract some 30 customers; with that $1,000 I manage to attract about 600 customers in Latin America.

Let’s move on to the downside…

– Opening a restaurant in these countries is usually complex at the start, because there are many complications with the paperwork; unfortunately our countries are run by people who cannot even run a family and definitely do not have the capacity to run countries.

Cumbersome procedures, poor service, complications everywhere, etc. The politicians who run some developing countries are a truly strange species… they talk all the time about wanting to encourage job creation and the creation of small businesses; they know the country needs it, but when you go and try, they put many obstacles in your way.

Fortunately, these problems only arise at the beginning, or rather, when you carry out the procedures to operate legally, because it is no secret that many restaurants start operating without a permit. That situation has been caused by the inefficiency of those who run the entities responsible for granting the corresponding permits, and honestly, there is nothing wrong with starting without permits. It is not fair for you to stop fighting for your dreams because of politicians.

It is “healthier” for the soul to pay the fines you owe for operating illegally for a while than never to have tried to make your dream come true because of some foolish politicians.

– After that, you have to work, and hard. Forget about vacations, weekends, holidays, etc. for a while, at least for 2 or 3 years. The success of your restaurant will depend on the effort you put into doing things the right way.

If you work hard and put effort into your venture, you can be completely sure that you will succeed and you will be able to enjoy just how profitable restaurants can be, no matter which country you are in.